BUSINESS STRATEGY

51110 / MKT3002

LECTURE Ten

Strategy Implementation
‘Organisational structure and
design’

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Module 10
‘Organisational structure and design’
Learning outcomes- at the conclusion of
this module, students should be able to:
Describe the main types of organisational structures
Compare the various multi-national organisational
structures
Define devolution
Describe strategic planning, financial control &
strategic control
Define organisational configuration; building blocks
and co-ordinating mechanisms
Undertake a stakeholder mapping exercise and
Describe Mintzberg’s six organisational configurations

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Key words and concepts
Simple structure
Functional structure
Multi-national structure
Holding company
Matrix structure
Virtual organisation
Related diversification
Vertical integration
Transnational corporation
Devolution
Strategic planning style
Financial control
Strategic control

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Introduction
This module looks at basic organisational
structural forms and how management
authority is exercised within the
organisation; it asks the following:
Have major changes occurred in the firm’s
internal strategic position?
Have major changes occurred in the firm’s
external strategic position?
Has the firm progressed satisfactorily toward
achieving its stated objectives?

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Structural types
• The simple structure;
• The functional structure;
• The multi-divisional structure;
• The holding company structure;
• The matrix structure;
• Intermediate structures & structural variations;
• Network & virtual organisations; and
• Structural types in multi-national companies.
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The simple structure

The simple structure: ‘is one in

which the organisation is run by the
personal control of an individual’.
(Johnson & Scholes 1999, p. 402)

Management problems arise when such

businesses grow.
Brother’s Neilson, Uncle Tony’s Kebabs etc could not
keep this structure in their quest for growth

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The functional structure
‘based on the primary activities that have to be
carried out, such as production, finance and
accounting, marketing and personnel’.
(Johnson & Scholes 1999, p. 403)

 Organisations are organised around specific functions

 Departments and “teams” are designed each with its own
leadership structure
 Results in specific task orientation rather than the greater
good of the whole organisation
 Can result in many sub-cultures, goals, norms etc
 Departmental feuds can result with ‘horror’ stories about
other departments. Blaming can often result.
 Develops specialist skills and efficiencies but lacks
integration which may be needed for strategic growth
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The multi-divisional
structure
‘the subdivision of the firm into into (operating)
units (divisions) on the basis of products,
services, geographical areas or processes of the
enterprise’.
(Johnson & Scholes 1999, p. 404)
Used to manage diversified companies
Good ownership of strategic direction and
outcomes for SBU
Corporate control is loose and mainly revolves
around corporate planning and budgeting
Can be fairly decentralised and autonomous
May result in competition between divisions and
some cannibalisation
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The holding company
structure
‘is an investment company consisting of shareholdings
in a variety of separate business operations, over which
the corporate centre exercises simple control’.
(Johnson & Scholes 1999, p. 408)

Very diversified corporation

The SBU structural form groups similar divisions or
structures into strategic business units and delegates
authority and responsibility for each unit to to a senior
exec. who reports the CEO.
Very distinct SBU structure normally with individual
brands and names and allowed to run itself
Corporate parent has whole or part shareholdings in
many sperate firms
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The holding company
structure (Cont)
Advantages Disadvantages
Suitable for complex Requires an additional
and growing business layer of management
environments
(high salary costs)
Reduces gap between
upper & lower May reduce x-
management levels fertilisation of ideas
Improves inter-firm within the corporation
communication Can dissipate core
Strategy competencies thereby
implementation can be reducing capacity to
facilitated more develop new products
effectively and technologies

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The matrix structure
‘combination of structures which often takes the
form of product and geographical divisions or
functional and divisional structures operating in
tandem’. (Johnson & Scholes 1999, p. 409)

Complex – dependent upon both vertical & horizontal

flows of authority & communication.
Integrates activities, planning and allocation of resources
to overcome issues of functions and divisions
Used in small or large firms with multiple products,
markets and functions
Dual (or more) management resulting in 2 boss syndrome
and conflicting orders.
Queensland Retail manager reports to Australia retail director,
Australia category manager and Australian MD
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The matrix structure
(Cont)
Advantages Disadvantages
Can integrate diverse Very complex
resources to address Lacks clear
an immediate problem accountability
Project objectives can More suited to a
developmental role
be clearly defined
Can result in high
Often suitable for overhead costs
defence, research &
Needs effective
health industries communication
channels to avoid
mistrust between
specialist areas

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Other structures
In reality very few firms follow the rigid models as
described but adapt & modify such models to meet specific
needs & contextual situations.

Firms need to develop structure based on;

Degree of control sought over product management, strategic
planning, organisational functions
Degree of diversity in geography (markets served) functions and
product categories (SBUs)
Need for growth and response to environmental change
Need for accountability and measurement of KPIs
Desire to motivate, train and develop employees along a career path
In view of this there are 3 major elements to consider when
designing the structure

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The elements of
organisational design

Three elements:
Centralisation vs. devolution (structure on the
responsibility for operational and strategic
decision making)
Organisational configurations (matching the
structure with the context that the
organisation is operating)
Resource allocation & control processes
(influence on the behaviour of people and
assist strategic development)

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Centralisation vs.
devolution
Devolution is: ‘the extent to which the
centre of the organisation delegates
decision making to units & managers
lower down the hierarchy’.
(Johnson & Scholes 1999, p. 423)

Issues that managers trying to avoid:

“out of touch” in the markets and operations
of the business.
Overcentralisation (too concerned with
internal matters).
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Centralisation vs.
devolution (Cont)
The role of the centre  Dividing responsibilities
Improve efficiency. – Strategic planning.
Providing expertise and – Financial control.
services – Strategic control.
Providing investment.
Fostering innovation.
Mitigating risk.
Providing strong external
image.
Encouraging collaboration
and co-ordination.
Setting standard.

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Organisational configurations
‘The configuration of an organisation is the
detailed design consisting of a number of
building blocks and co-ordinating mechanisms’.

(Johnson & Scholes 1999, p. 431)

Mintzberg (1979) six building blocks of

organisations:
The operating core
The strategic apex
The middle line
The techno-structure
Support staff
Ideology
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Lecture 10 review
Types of organisational structure
The elements of organisational design
Centralisation vs. devolution
Organisational configurations

Now go back and ask yourself the introductory questions

Now ask which organisational structure will MOST benefit
the firm, in terms of being able to achieve the strategic
outcomes recommended in your report?
Is a change required? If YES then is this change realistic?
If NO then are the recommendations implementable? If NO
then…….

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Next lecture

Module 11: Resource allocation

and control

(Study book: Module 11 - Text Chapter 10)

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Next tutorial

Assignment 1. (preparation)

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